BCG Matrix of Pepsi | BCG Matrix analysis of Pepsi

BCG Matrix also is known as the growth-share

matrix is used by organizations to classify their

business units or products into 4 different

categories: Dogs, Stars, Cash Cows and Question

Mark.

The growth rate of an industry and the market

share of a respective business relative to the

largest competitor present in the industry are taken as the basis for the classifications, for that

reason, BCG Matrix is also called as Growth-Share Matrix.

Past few years have been an inflection point for the company with Pepsico seeing a major drop

in their carbonated drinks business, thus prompting it to go back to the drawing board and relook

at its future strategy and also its product offerings.

In this BCG matrix, we will talk about different brands of Pepsico which over the years have

seen a fall in market share due to changing market scenarios and also brands which saw

exponential growth in their market share.

Let’s see what the 4 different quadrants of BCG Matrix are:

Dogs

These are the products with low growth or market share

These are low growth or low market share products and

have very few chances of showing any growth.

The investment strategy for these products has to be very well thought through by the

management as there are chances that these businesses might not yield any profit for the

organization.

These business units or products are cash traps and therefore are not seen as a useful source of

earning.

Cash Cows

These are the products which are in low growth

markets with high market share.

Products which are market leaders in their specific

industry and their industry is not expected to see any major growth in the future are considered

as Cash Cows.

These products are the money churners for the company and require very low investments to

sustain their leadership and profitability in the market.

Star

These are the products which are in high growth markets

with a high market share.

Products or Business Units which hold a high market share and are also considered to grow in

the future are positioned as Stars.

As a result, companies are interested to invest in developing these units further to gain a larger

market share and attain a stronger position in the market.

These products have the potential of being positioned as cash cows in the future owing to the

industry growth prospects.

Question Mark

Products in high growth markets with a low market

share.

Products or business units of the company that are still in the nascent stage of their product

lifecycle and can either become a revenue generator by taking the position of a Star or can

become a loss-making machine for the company in the future.

The industry has high potential to grow hence giving the room to the products to grow as well

only if the pertinent issues are managed effectively.

Let’s check out the BCG Matrix of Pepsi and

what products of the company fall under what

Quadrant.

CASH COWS:

Cash cows are the products that have a high

market share in a market that has low growth.

For Pepsi, Frito Lays is undoubtedly the Cash Cow for the company.
Ξ Frito Lays dominates the savory snacks market in the U.S with a 36.6% market share. The

next biggest manufacturers in this sector are Kellogg’s and Mondelez with much smaller 7% and

5.6% share respectively.

In the tortilla and tostada chips segment, Frito lays command a market share of 72.4% with

strong brands such as Doritos and Tostitos contributing to this market share gain.

The product requires very less investment to maintain its market share and fight off any

competition.

STARS:

The products or business units that have a high market share in high growth industry are the stars

of the organization.

Ξ In the case of Pepsico, Pepsi falls in the Star quadrant of the BCG Matrix of Pepsi.

Over the years, Pepsi has faced stiff competition from Coca-Cola and has also seen its market

share take a hit.

The company has to spend millions of dollars on brand awareness and promotional activities in

order to maintain its market share.

People are turning away from sugary drinks and empty calories. Evolving tastes and sugar

taxes have encouraged brands like Pepsi to invest in healthier alternatives.

Because of stiff competition from Coca-Cola and changing customer preferences

towards healthy and low-calorie drinks, Pepsi is seeing a shift from STAR quadrant to Dogs

quadrant.
Ξ Aquafina is one other brand which can be placed in star quadrant, Aquafina holds 15% of

bottled water market share and is second to Bisleri which has 36% market share.

Aquafina is slowly and steadily catching up with Bisleri and is expected to see a twice a growth

in the next 5 years.

Ξ Tropicana and Gatorade: Amid falling sales of aerated drinks as consumers shift to healthier

drinks, Pepsico aims to double the Tropicana business by 2020.

Carbonated soft drinks segment has seen a major decline in the past few years, the overall liquid

refreshment beverage market has been growing. Consumers aren’t drinking fewer fluids, they are

just not drinking sugary sodas as much anymore.

This change in consumer preferences is what has helped Gatorade see an exponential growth in

its market share.

Ξ Gatorade has been a forerunner for Pepsi in sports drink market with a mammoth 77% share,

whereas Powerade has 20% of this market.

Growing healthier lifestyle trends and emerging markets have prompted the brand to invest large

amounts of investments in healthier beverages and snacks in order to differentiate from

competitors and grow brand awareness.

QUESTION MARK:

There are products that formulate a part of the industry that is still in the phase of development,

yet the organization has not been able to create a significant position in that industry. The small

market share obtained by the organization makes the future outlook for the product uncertain,

therefore investing in such domains is seen as a high-risk decision.

Diet Sodas, once seen by consumers looking to cut calories as an alternative to traditions sodas,

are losing their fizz.

Ξ Diet Pepsi was launched with an aim to help Pepsico regain their market share but failed to

capture the desired response from the customers and one of the major reasons for that was tough

competition from Diet Coke.

Ξ 7up Nimbooz is one more brand which failed to succeed, launched in India in 2009, the brand

was not able to achieve significant sales volume.

DOGS:

Dogs are those products that were perceived to have the potential to grow but however failed to
create magic due to the slow market growth.

Failure to deliver the expected results makes the product a source of loss for the organization,

propelling the management to withdraw future investment in the venture. Since the product is not

expected to bring in any significant capital, future investment is seen as a wastage of company

resources, which could be invested in a Question mark or Star category instead.

Ξ Pepsi – Seeing Pepsi in Dog quadrant will shock a lot of people but considering the present

and future scenario, Pepsi will see a shift from Star to Dog quadrant.

Pepsi’s has dropped from 10.3% to 8.4%,

Declining carbonated soft drinks segment share due to increasing demand for low calorie and

healthy beverages and snacks is what is attributing the diminishing sales of Pepsi brand.

This concludes the BCG Matrix of Pepsi.